Notes on the Economics of Infinity

Abstract

This is an attempt to expose the essence of Samuelson's consumption loan paradox. It is maintained that the double infinity of traders and dated commodities allows for competitive equilibria that are not Pareto-optimal. While such models are most interesting in the dynamic setting, the fact that generations do not meet is not essential. The chain-letter aspect of the model reminds us that the appropriate form of the budget constraint is not obvious for the potentially infinitely long-lived economic entity (such as the corporation or the family). The analysis is related to recent contributions in the theories of general equilibrium, economic planning, and decentralization.

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